What Military Servicemembers Should Know About Insurance

(July 2011)

Military servicemembers can be deployed on short notice, leaving little time to handle their personal or business affairs. Insurance coverage, in particular, is often affected when you move out of state or spend a long time away from home.

You should review your insurance coverage before you deploy to decide if the coverage amounts will meet your needs while you’re away. You can also consider buying additional coverage or policies, suspending coverage, and paying premiums to avoid unintended lapses or cancellations in coverage.

To learn more about your insurance options, visit TDI’s Resource Page for Military Servicemembers at www.tdi.state.tx.us/consumer/cpmmilitary.html

Insurance law varies by state. This publication only applies to policies and certificates issued in Texas. If you purchased a policy in another state, that state’s laws apply to the policy. You should contact the department of insurance in that state for any coverage questions. Visit the National Association of Insurance Commissioner’s website at www.naic.org for state contact information.

Overview

Before you purchase any insurance policy, ask the agent how the company will handle issues that may arise when you’re deployed. Companies handle issues differently, so shop around to find one that suits your needs.
One common issue is paying premiums or renewing policies while you’re deployed. Before you leave, ask your agent how to pay your premiums and when your policy is due for renewal. You may be able to pay your premiums automatically from your bank account or renew your policy early.

Some insurance companies might also allow you to suspend certain coverages while you’re deployed. Most insurance companies use payment and coverage history to determine eligibility and rates. If your insurance lapses or expires while you’re away, you could come home to find insurance companies unwilling to insure you or only willing to insure you at a higher rate.

Be Cautious and Shop Around

If you’re thinking about buying insurance before you’re deployed, consider your needs carefully.

Be especially cautious if you or someone in your family is approached about buying life or health insurance. Life and health issues can get emotional, and some agents may use high-pressure or misleading sales tactics to sell you insurance. You might also be approached by agents who are former servicemembers, but remember they represent insurance companies and not the military. No matter who tries to sell you a policy, even if it’s an agent with the best of intentions, it’s a good idea to shop around and get multiple quotes.

Auto Insurance

Suspending Your Coverage

If you will be deployed for a long time and no one will be driving your car, you may be able to suspend some or all of your coverage to save money on premiums. Insurance companies must add an endorsement to your policy to suspend any coverage, but not all companies will suspend coverages.

If your policy covers other people and suspending it is not an option, you could remove yourself from the policy while you’re away. Talk to your insurance company or agent to learn more about your options.

Although your coverages and policy terms may be different, this summary can help you understand auto insurance coverages and the effect of suspending coverage.

Liability coverage. Texas law requires all drivers in the state to have a minimum amount of liability coverage. This coverage pays for other people’s expenses if you or someone driving your car causes an accident.
To legally suspend liability coverage, you must store your car so no one else can drive it. Many military bases provide secure vehicle storage facilities for servicemembers.
Collision and other than collision (comprehensive) coverage. These coverages pay to repair or replace your car if it is stolen or damaged by fire, vandalism, hail, or a collision. Collision and comprehensive coverage may also pay if your car is damaged while in storage. If you cancel or suspend coverage and your car is stolen or damaged in storage, you may have to pay the full cost of repair or replacement yourself. Carefully consider whether canceling this coverage is in your best interest.
If you still owe money on your car, your lender will usually require that you keep collision and comprehensive coverage. If you cancel these coverages on a car you still owe money on, the insurance company will notify your lender. The lender will likely buy single-interest coverage and add the cost to your loan payment. This type of coverage is expensive and protects only the lender.
Other coverages. You may also have other coverages, such as uninsured/underinsured motorist, medical payments, personal injury protection, rental reimbursement, and towing and labor coverages. These coverages are optional and provide additional protection for you and others if you’re involved in an accident. If no one will be using your car while you’re deployed, you may be able to suspend these coverages.

Policy Cancellations or Lapses

It’s important that you ensure your premium payments are made on time while you’re deployed. If your insurance company cancels your policy because you didn’t pay your premium on time – or for any other legal reason – you’ll likely have trouble finding a new insurance policy or finding a policy with the same rate.

Many companies won’t insure drivers who have lapses in their insurance coverage. Companies may also charge higher premiums for lapses longer than 30 days.

Homeowners Insurance

Review your coverage before you’re deployed. Make sure your policy limits are enough to cover your home and your personal property at current costs. You may want to increase your coverage if you’ve made additions or improvements to your property or you’ve recently purchased expensive items such as televisions, computers, or stereo equipment.

Personal Property Coverage

Compile a home inventory of the items you own, the date you bought them, and their value. Update the inventory regularly or when you buy something new. A home inventory can help you decide if you need higher personal property coverage and can help you remember what you own if you ever have a claim. You can use TDI’s Home Inventory Checklist by visiting www.tdi.state.tx.us/pubs/consumer/cb086.pdf.

The military usually doesn’t pay to repair or replace property that is damaged or stolen in military housing or in a war zone. Homeowners insurance typically covers personal property that you take with you while traveling, but most policies exclude coverage for damage caused directly or indirectly from war. Ask your agent if personal items you take on your deployment will be covered if they’re lost, stolen, or damaged.

Also, make sure you understand whether you have actual cash value coverage or replacement cost coverage for your property.

Replacement cost coverage will pay to replace your property at the current cost without any deductions taken for depreciation or wear and tear.
Actual cash value is an item's replacement cost, minus depreciation.

If your policy only pays the actual cash value, you may be able to buy replacement cost coverage for additional premium.

Coverage for Vacant Homes

Many homeowners policies have a vacancy clause that will go into effect after a certain amount of time (typically 60 days). If your home is vacant and you suffer a loss, the company could deny your claim or pay you a reduced amount.

Many companies offer an endorsement that will provide coverage for a house that is vacant for a long time. Talk with your insurance agent or company to learn how the company defines vacancy and whether the company will pay claims on a vacant house.

Renters Insurance

If you have renters insurance for a home or apartment in Texas, your policy will typically pay to repair or replace personal property you take with you while traveling. However, most policies exclude coverage for damage caused directly or indirectly by war.

Ask your agent or company whether your renters policy will pay to repair or replace any property you take with you during your deployment. Also, make sure you understand whether you have actual cash value or replacement cost coverage.

Note: If you’re shopping for auto, homeowners, or renters insurance, use www.HelpInsure.com. HelpInsure.com is a free service of TDI and the Office of Public Insurance Counsel to help you shop for coverage. You can compare sample rates provided by insurance companies; view detailed policy coverage comparisons, company complaint indexes, and financial ratings; and learn about available discounts.

Health Care Coverage

Military and Employer Health Plans

Active duty personnel, reservists, and National Guard members receive military health coverage after 30 consecutive days of active duty service.

Many reservists and National Guard members have health coverage for themselves and their families through an employer-sponsored health plan and want to continue the coverage while on active duty. Talk with your benefits administrator at work to learn what will happen with your health coverage if you are called to active duty. While employers are not required to pay your premiums you’re on active duty, some employers choose to do so.

Losing Your Employer Health Plan

If you leave your job to join the military, federal laws – the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) – allow you to continue coverage for yourself up to 18 months and for your dependents up to 36 months. You will be responsible for paying the full cost of the health plan yourself, which could be up to 102 percent of the premium.

COBRA applies to all employer health benefit plans with 20 or more employees, except plans sponsored by the federal government and certain church-related organizations. You are not eligible for COBRA benefits if you lose your coverage because of involuntary termination for cause.

Anyone with COBRA coverage may continue coverage, even if their covered family members do not. For example, your spouse or a dependent could continue coverage through USERRA and COBRA if you choose to drop the coverage.

If your employer discontinued your health coverage and you return to the company directly after your military deployment, federal law requires your health plan to resume your coverage without any type of waiting period.

State Continuation

Texas law allows you to continue coverage for you and your dependents after USERRA or COBRA continuation coverage has ended.

If you are eligible for COBRA as a…	COBRA applies for...		Texas continuation applies for...	For a total continuation period of…
Primary plan member (direct employee)	18 months	+	6 months	24 months
Secondary plan member (spouse, ex-spouse or dependent child)	36 months	+	6 months	42 months
If you are not eligible for COBRA as a…
Primary or secondary plan member	0 months	+	9 months	9 months

Your employer and any insurance company that provides you coverage must tell you about your right to continue coverage and tell you how to continue it. If you want to continue coverage, you must notify your employer in writing no later than the 60th day after coverage ended.

The continuation period begins after any federal COBRA extension period ends or begins immediately if you are not eligible for COBRA coverage.

Before the Texas continuation period ends, your group plan is also required to tell you about enrolling in the Texas Health Insurance Pool. The pool offers coverage to Texans who can’t find coverage because of their medical condition and to certain individuals who have lost their employer-sponsored health coverage.

Cancel and Reinstate an Individual Plan

If you have an individual health care plan, you can cancel coverage while you’re on active duty and request to be fully reinstated after your service is over.

The federal Servicemembers Civil Relief Act (SCRA) requires insurance companies to reinstate your insurance with no waiting period when you return from active duty service if you had coverage before you were called to active duty. You must request the reinstatement in writing no later than 120 days after you’re released from military service. You are not entitled to reinstatement if you are eligible for health coverage through an employer.

For more information about SCRA, call the U.S. Department of Veterans Affairs (VA) or visit its website

1-800-669-8477
www.insurance.va.gov

Life Insurance

Life insurance protects your spouse and family from financial loss if you die. If you’re single, don’t have children, and have no one depending on you for financial support, you may only need a small amount of life insurance or enough to settle your estate.

Military Life Insurance

The Servicemembers Group Life Insurance (SGLI) program offers insurance for members of the military at low rates. Servicemembers can buy SGLI coverage in $50,000 increments, up to $400,000. The premium for $400,000 of coverage is $27 per month regardless of your age. Active duty military personnel, including reservists and National Guard members called to active duty, are automatically insured for $400,000 unless they reduce the amount or refuse the coverage in writing.

You can also purchase SGLI insurance for your spouse in $10,000 increments, up to $100,000. The amount you purchase for your spouse cannot be greater than the amount you purchased for yourself.
Dependent children are insured for $10,000 of coverage at no cost. There is also a $100,000 death gratuity for a servicemember who dies while on active duty.

After you leave the military, SGLI may be converted to Veteran’s Group Life Insurance (VGLI) or to private insurance with a participating company... Either option will increase your premium because it will reflect the cost of insurance for someone your age. If you are in good health, a better option may be to shop for your own policy rather than convert to VGLI or use one of the participating companies. For more information, call the SGLI office or visit the VA website

1-800-419-1473
www.insurance.va.gov

Deceptive and Misleading Sales Practices

Texas has rules to help people from using deceptive and misleading practices to sell life insurance. Many servicemembers who think they purchased an investment or savings plan later discover they actually bought an expensive life insurance policy with a small death benefit, combined with a side or accumulation fund. Congress has declared these side fund products inappropriate for most military personnel.

The following questions can help you determine if you’ve been the victim of deceptive or misleading sales practices:

Did you receive a card from someone or through the mail that offered information about your military or VA benefits or about a military service organization, only later to receive a sales pitch for insurance, investments, savings, or retirement?
Did someone offer you free pizza, movie tickets, or some other giveaway to attend a meeting or sales pitch for insurance, investments, savings, or retirement?
Did the sales pitch focus on tax-deferred savings paying a high rate of interest? Did someone ask you how much life insurance you needed, or ask how much you could afford to “save” each month?
Did anyone say or imply that SGLI might not always pay or that the federal thrift savings plan isn’t a good investment?
Did someone pressure you to sign up or rush you through an application without time to understand the details, ask questions, or read all the information?
Did they fail or refuse to give you copies of your paperwork and information clearly describing what you bought?
Did anyone asked for access to your myPay account to set up payments to a bank or to someone you’ve never done business with?

If you answered yes to any of the questions, contact your base’s Financial Readiness Office and ask the staff to review your policy. If you believe you’ve been the victim of deceptive or misleading sales tactics, you can file a complaint with TDI online or by calling the Consumer Help Line.

Buying Life Insurance

If you determine that you need more life insurance than SGLI provides, compare policies and get price quotes from several companies before buying a policy. Make sure you understand what coverages included and any exclusions or limitations. Low-cost term life insurance is also available through many veterans’ association websites. Unlike SGLI, most private insurance policies exclude coverage for acts of war.

Most life insurance policies will have a two-year contestable period. During this period, a company can refuse to pay benefits for suicides or for material misrepresentations, concealment, or fraud on an application.

As with any type of insurance, only buy from licensed agents and companies and consider factors other than cost, such as a company’s customer service history and its financial stability. You can learn a company’s license status and get other information about companies you’re considering by calling our Consumer Help Line or by viewing company profiles on our website.

The SCRA allows active duty servicemembers to defer insurance premiums and payments on their individual life insurance policies while they’re on active duty and for up to two years afterward. Requests for deferment must be approved in advance by the VA. Servicemembers will have two years after they’re released from active duty to repay the accumulated premiums and interest. Call the VA or visit its website for more information about SCRA.

Shopping for Coverage

Use the following tips as you shop for insurance:

Get quotes from several companies. Each insurance company uses its own underwriting guidelines. One company may sell you a policy at a substantially lower premium than another. Life insurance agents are captive, meaning they can only issue policies for the insurance company they work for. Brokers, on the other hand, are noncaptive independent contractors who can sell policies for multiple insurance companies. A broker may therefore be able to provide you with price quotes from several companies during a single visit.
HelpInsure.com is a free service of TDI and the Office of Public Insurance Counsel to help you shop for auto, homeowner, condo, and renters insurance. You can compare sample rates; view policy coverage comparisons, company complaint indexes, and financial ratings; and learn about available discounts.
Compare “apples to apples.” Be sure the policies you compare offer similar levels of coverage. The more features, options, and added benefits a policy includes, the more it will typically cost. A policy that’s substantially cheaper than another may have fewer features or provide a substantially lower death benefit. A more expensive policy might actually prove to be a better value when you calculate the amount of the death benefit per premium dollar charged. However, don’t just decide on price; decide if the features are worth it.
Buy the policy that’s right for you. The more a policy costs, the more an agent or broker typically earns as a commission. When shopping for life insurance, keep in mind that the policy that’s best for your agent or broker might not be the best for your insurance needs.
Before you buy an insurance policy, ask the agent or broker how the company will handle issues that may arise if you’re deployed. Company guidelines can vary.
Make sure your company and agent are licensed. It is illegal for an agent or company to sell insurance in Texas without a state license. The Life, Accident, Health, and Hospital Insurance Service Guaranty Association pays some or all of most claims for Texas-licensed companies that go bankrupt or become insolvent. If your company is unlicensed and goes bankrupt, your death benefit could go unpaid.
Research your company. An insurance company’s financial strength and customer service record can be good indicators of the level of service you can expect. You can learn a company’s financial rating by calling TDI’s Consumer Help Line. You can learn information about the frequency of a company’s customer complaints against a company by calling the Consumer Help Line or by using the Company Lookup feature on our website.
Shop for a low-load policy. You may save money, particularly on cash value life insurance, if you buy a policy with low commissions and administrative fees, collectively known as “the load.” Financial planners who are licensed insurance counselors often sell these policies. Generally, financial planners charge clients a flat service fee as opposed to earning commissions, meaning they receive no benefit from a high load. Since low load policies have fewer initial fees, your risk of losing money is also reduced if you cash out early from a cash value policy.
Use your “free-look” period. Most Texas policies will provide you with a free look or right to examine period of at least 10 days, during which you may cancel the policy for a full refund for any reason. Use this time to read your policy carefully to be sure the coverage is right for you.

Professionals in the Military

Insurance Professionals

Many reservists and National Guard members work in the insurance industry and, like all other Texas-licensed agents and brokers, are normally required to fulfill continuing education requirements. The commissioner of insurance, however, has waived these requirements for Texas-licensed agents and brokers who cannot fulfill their continuing education obligations because of their military service.

Returning servicemembers are also exempt from penalties or fines for failing to renew a license that expired during the service period.

Professionals with Liability Insurance

Physicians, lawyers, and other designated professionals can request in writing that their insurance company suspend their professional liability insurance policy while they’re on active duty. SCRA requires insurance companies to cancel the coverage and to reinstate it if a servicemember requests reinstatement within 30 days of return.

Servicemembers won’t be required to pay premiums during the cancelation and could receive a premium reimbursement if they’ve already paid premiums. Servicemembers should be aware that they will not receive any liability protection while their coverage is canceled.

Assigning Power of Attorney

Power of attorney is a special legal designation that authorizes someone to act on your behalf in financial, personal, or legal matters. If you’re deployed, you may want to consider assigning power of attorney to a spouse, family member, or trusted friend.

To assign power of attorney, you and the person you designate must sign a form in front of a notary public. Contact your judge advocate general’s office for help with a power of attorney or for a listing of recommended notaries in your area

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

You can also visit HelpInsure.com to help you shop for automobile, homeowners, condo, and renters insurance, and TexasHealthOptions.com to learn more about health care coverage and your options.

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.

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